If Japanese Prime Minister Shinzo Abe were to call a snap election, it could extend the country’s stock rally, but analysts say it would undermine confidence in his ability to put the economy back on a stable path in the longer-run.
Speculation is building that Abe is considering dissolving the lower house of parliament, the more powerful of the two chambers, and announcing a snap election in mid-December if he decides to postpone the 2015 sales tax hike.
“A snap election could have the virtue of giving the government a stronger mandate,” Marcel Thieliant, Japan economist at Capital Economics wrote in a note.
“But it would not be a long-term positive if coupled with a delay in the tax hike… [because it] would probably be seen as a watering down of a key element of Abenomics and could weaken momentum for further reform,” he said.
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